Tulsa World: Web retailers fight sales taxes

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Web retailers fight sales taxes
Some states are trying to cash in on e-commerce boom.

Internet companies are fighting attempts to charge sales taxes in states where online affiliates are based. Bloomberg News file

By RACHEL METZ Associated Press
Published: 7/12/2009 2:25 AM
Last Modified: 7/12/2009 4:22 AM

NEW YORK — In a big break for online shoppers, Web retailers generally don't have to charge sales taxes in states where they lack a store or some other physical presence.

Increasingly, states aching under the weight of the recession are seeking a way around that rule. Because companies like Amazon.com Inc. get help drumming up sales from online affiliates — people who link to products on their blogs, promote Web shopping deals and offer coupons — several states say the Internet retailers should charge sales taxes in states where those affiliates are based.

The financial benefits may not be quite what the states anticipate, though. Rather than gearing up to collect taxes, Amazon and other Web retailers are simply shutting down their affiliate marketing programs. As the small businesses that participate in these programs get cut off, a state could lose tax revenue rather than add to it.

A look at what the affiliates do helps explain why. They're just one of several methods that e-commerce companies have for driving visitors to their Web sites, so nixing them is not necessarily a big loss for the companies.

It's a far bigger deal to people like Rich Owings.

By running Web sites like GPSTracklog.com from his home in Asheville, N.C., Owings serves as an affiliate for Amazon and other companies. Owings, 53, spends most of his time reviewing GPS gadgets and covering industry news. He links to navigation products of his choosing on Amazon's site, and if his readers click through and buy one, he gets a commission.

Owings estimates he brought in about $80,000 in affiliate revenue from various companies in 2008, about $50,000 of which came from Amazon. After Amazon recently shuttered its North Carolina affiliate program in response to that state's attempt to collect sales taxes, Owings said he and his wife were thinking about heading elsewhere to run their business.

"We're terrified," he said. "We just bought a house here a year ago and we're looking at having to move out of state just to keep our business going."

The amount of money at stake overall for state governments is somewhat murky. According to a recent University of Tennessee study, uncollected state and local taxes from online sales could total $7 billion this year. However, only a small part of this would stem from consumer purchases, because transactions between businesses make up the bulk of e-commerce sales. (Consumers are generally supposed to pay a "use tax" themselves on online purchases, but few do.)

Because any extra revenue is precious, several states, have passed laws seeking to cash in on Web retailers' affiliate relationships, while others are considering doing so. By RACHEL METZ Associated Press

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	Report Comment Mar, Tulsa (7/12/2009 10:33:20 AM) Everyone needs to remember that generally purchases made from online e-commerce stores there is shipping fees involved. So it is only fair that customer don't have to pay a sales tax when making purchases online. In other words, if you shop at a brick and motar store you pay a sales tax and no shipping fees. If you shop at an online only store you pay shipping fees. Fair is fair.
	Report Comment Thunder196, Tulsa (7/12/2009 3:30:17 PM) I buy a lot of things from Amazon, I have for years. I very seldom ever pay for shipping. There are restrictions. Order total of $25.00 or more, and some items are excluded. Amazon says if you use super saver, order takes about 5 days longer to ship. However, I have found usually it doesn't take any longer just once in a while.
	Report Comment moogle, Tulsa (7/12/2009 4:52:43 PM) Being the swell guy that I am, I go ahead and pay the maximum on Oklahoma's so-called "use tax." So Oklahoma is getting its cut from me.
	Report Comment TylerHall, Owasso (7/12/2009 11:30:55 PM) Mar, you should apply for a job with the IRS -- your poor logic on what constitutes fair taxation seems to be on par with some of the best!

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